Question

Sal Minella sells his subs for $8. His variable costs are $6 and his fixed costs are $150,000. What sales volume must Sal sell in order to break-even?

A. $390,000.
B. $399,999.
C. $600,000.
D. $699,999.

Answer 1

Sal Minella must sell 75,000 subs, or $600,000 worth, to reach the break-even point.

Step-by-step explanation:

To determine the break-even point in sales volume for Sal Minella, the formula is employed: Break-even point in units = Fixed costs / (Sales price per unit - Variable cost per unit). Using the given financial information, the calculation is $150,000 / ($8 - $6) = 75,000 units. To find the break-even sales volume in dollars, the number of units is multiplied by the sales price: 75,000 units * $8 = $600,000.

Hence, the accurate response to the multiple-choice question is C. $600,000. This represents the sales volume Sal Minella must achieve to cover fixed costs and variable costs, breaking even without incurring a loss. Understanding the break-even point is crucial for businesses to assess financial viability and plan for profitability.